eBay has successfully defended a lawsuit brought by Tiffany, which alleged trademark infringement and contributory trademark infringement for eBay's facilitation of a marketplace for the sale of counterfeit Tiffany jewelry. eBay won despite the Court acknowledging that a significant percentage of Tiffany goods sold on eBay are counterfeit. Tiffany has filed a notice of appeal.
More than 6 million new listings appear on eBay every day, and at any given time, 100 million listings appear on the web site. eBay’s revenue is based on listings and a percentage of the eventual sale. The court found that eBay made $4 million over three years from the sale of Tiffany goods. Tiffany's research indicated that 73% of this was counterfeit; the court agreed that at least a significant number of the items were counterfeit.
The Tiffany court concluded that the concept of contributory infringement could apply to entities like eBay that “provide a marketplace for infringement and maintain direct control over that venue.” (This is important because it acknowledges that the eBay facility could, in theory, be covered under a claim of contributory infringement). But the court found that although eBay had posted a "generalized notice" that some portion of Tiffany goods sold on its web site were counterfeit, that did not translate into knowledge of specific infringers. The court found that eBay had not been willfully blind to evidence of counterfeiting on its web site and that eBay acted responsibly upon notification through application of the VeRO notice and takedown program.
Moreover, not all Tiffany merchandise sold through eBay is counterfeit. The court noted the doctrine of contributory trademark infringement should not be used to require defendants to refuse to provide a product or service to those who merely might be infringing. Tiffany had suggested that any lot of five items or more should automatically be considered counterfeit, because Tiffany does not use third party resellers. But the Court found that because there were listings of five or more items that were all genuine, Tiffany's argument was not persuasive.
The court concluded that "reason to know" does not extend, under current law, to a duty to seek out and prevent violations.
This is exactly the opposite of the conclusion reached by the French courts. In June 2008, two French courts issued opinions in cases filed by HERMES and Louis Vuitton (LVMH). Like the Tiffany court, the HERMES and LVMH courts (Troyes and Paris, respectively) also found that eBay exerts sufficient control over its web site, to be more than merely a passive host. In contrast to the Tiffany court, however, the French courts found that being in the category of editor of services on the web site gave eBay a responsibility to take affirmative measures to prevent fraudulent activity. The LVMH court simply awarded (large) damages to the plaintiff, but the HERMES court went a bit further and set out standards for eBay to implement in order to reduce fraud.